Allocation Rates And Its Effects On The Current Allocation Rate Essay

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allocation rates to make them more efficient. Second, policy makers could change allocations to reflect more accurate precipitation rates along with being more efficient. Third, a market based system could be implemented allowing for tradeable water rights much like the market system in Australia. All of these policy options would solve the inefficiencies in the current allocation rates. They would not solve the supply and demand complications due to the ongoing drought or growing populations. The first option would simply change the allocation of water making it more efficient and removing any potential deadweight loss that may otherwise exist. The second option would merely make allocation rates more efficient by basing them off of more accurate precipitation amounts. The third, would make it easier for water rights to be traded, leading to a more efficient outcome through trading rather than mandating consumption amounts.
To start with the first policy option an effort must take place to test the efficiency of current allocation rates. In an attempt to do so, a simple model will be used to determine what an efficient allocation would be. To further simplify the model, it will consist of only Upper and Lower basins, averaging statistics taken from the states located within each basin. This simple model will allow variables to be changed to help identify how they interact with the efficient allocation of water. To perform this model, it is necessary to have a demand

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